How Did World War 1 Dominate The American Economy

Since the United States entered the war late, it did not accrue loans, and it did not suffer from any physical destruction. During the war, the United States provided loans to the allies, which the allies then used to buy supplies from America. World War I shifted world economic dominance from Britain to America. While the rest of the world was rebuilding from the devastation of the war, the American economy flourished. The 1920s were economically prosperous because of the growth of new industries, such as cars and radios. During this economic boom, America immediately seized the opportunity to dominate the world economy. This dominance fostered the relationship between economics and politics. Economic factors, such as loans, debts, reparations,
and investments, led the United States to adapt imperialist foreign relation policies in the 1920s.
In the 1920s, administrative officials selected economic experts to help create foreign policies and thereby, grounded foreign relations on economic policy.
In 1921, president Warren Harding handpicked prominent businessmen to fill important political positions. Harding selected Herbert Hoover, a mining engineer, as secretary of commerce, Charles Evans Hughes, a Republican politician, as secretary of state, and Andrew Mellon, a Pittsburg businessman, as secretary of the treasury. These men joined forces with banks in order to promote American investment throughout the world. Andrew Mellon believed that American investment in overseas countries secured the country’s national interests. The State Department and the Treasury Department wrote rules for issuing loans to foreign countries. These rules stated that loans could not be given to countries who already owed the U.S. money, loans could not be given to illegitimate governments, and loans could not be given to foreign monopolies against the United States. Each stipulation demonstrated that the U.S. sought to protects its own bankers but more importantly, the U.S. wanted to ensure that they loaned money to countries who would pay them back. These stipulations significantly impacted foreign relations because it established and defined countries as either reliable or unreliable, which lead to conflict and
resentment.
The United States became the bank for the world because it established themselves as an economic powerhouse by maintaining a foothold in the world economy. Even though the United States did not have to pay reparations, other countries reparations impacted American foreign policy in the 1920s. Despite the horrific aftermath of the war, the great powers further punished loosing countries by making them pay reparations to other countries, such as France and Belgium. The U.S. became the bank for the world because it lent money to help countries pay back its reparations. For example, the Dawes Plan of 1924 attempted to resolve Germany’s weak and instable economic conditions after the war. America loaned money to Germany to help the country pay back its reparations and help stabilize the economy. American investors agreed to loan money to Germany so that the country would pay reparations to Great Britain and France, who would then repay their loans to America. This plan pumped massive amounts of American money into Germany in order to stabilize the economy. Americans only agreed to loan Germany money to gain profitable returns for themselves. It also allowed the U.S. to extend its control in Germany; the U.S. had more influence in Germany’s economic decision-making because they subsidized the country. This plan failed to invest money in research and industrial development that would produce long-term economic stability. Instead, it produced short-term economic growth and stability. This plan demonstrated how U.S. officials embedded economic factors into foreign relations.
Furthermore, the United States sought to avoid military conflicts while still dominating the world economy through manipulation.
The United States followed the foreign policy of independent internationalism, which asserted that the government participated in world affairs but avoided entering “collective securities.” In simplest terms, the U.S. wanted to have a voice in foreign policy, but it wanted to avoid alliances where they had to agree that an attack on one ally is an attack on all allies. Instead, the United States used economic factors to manipulate foreign policy in order to achieve its goals. Often countries willingly accepted Western foreign policies, and granted Western countries concessions in order to stabilize their economy. For example, Shah Reza Pahlavi of Iran appointed Arthur Millspaugh, an American economic advisor, to monitor Iran’s finances. Iran initially established economic relationships with the U.S. because they believed it was their opportunity to stabilize their economy. However, Iranians soon realized that Americans did not respect Iranian culture, traditions, and values. Americans created these relationships in order to promote U.S. economic growth. These relationships exacerbated economic hardship in the Middle East by identifying the U.S. as a core country that exploited the Middle East for raw materials and labor. Therefore, economic policy played a vital role in shaping foreign policy in the
1920s.
Throughout the 1920s, the U.S. used its economic prosperity to shape its foreign relations with the world. The U.S. unequally distributed money and resources to participants in the global market to ensure that the U.S. remained a top industrial power. The U.S. relied on economic policy instead of developing personal relationships to deal with other nations. By creating a foreign policy solely based on economic gains, the U.S. created conflicts with other nations that resulted in lasting resentments. Moreover, the stock market crash in 1929 demonstrated the ineffectiveness of America’s imperialist economic policies because this event produced a ripple effect on the entire world.